Chinese equities are likely to gain further support from a strengthening yuan, which has remained resilient despite ongoing trade tensions with the US, according to Goldman Sachs strategists.
They noted that for every 1% rise in the yuan against the US dollar, Chinese stocks could climb about 3%, driven by improved earnings prospects and increased foreign investment. Goldman recently revised its 12-month yuan forecast to 7 per dollar, up from 7.35.
“Chinese stocks usually perform well when the yuan appreciates,” GS maintain an overweight view on the market. Sectors such as consumer discretionary, property, and brokerages are seen as key beneficiaries of a stronger currency.
This article was written by Eamonn Sheridan at www.forexlive.com.